Pangkalpinang, Bangka-Belitung. Indonesia is the world's second-largest tin producer after China, with most of the mining operations concentrated in Bangka-Belitung Province.

The Jakarta Globe's Muhamad Al Azhari had the opportunity to interview Bangka-Belitung Governor Erzaldi Rosman Djohan, who detailed his plans on how he will lead a transformation to gradually shift the province's economic base beyond the tin mining industry.

The commodity's contribution to the wealth of the region's people stretches all the way back to the Dutch colonial era. Despite the metal's contribution to the economy having declined in recent years, the tin mining industry remains a powerful driver of the provincial economy, but at a cost of massive environmental damage on the two main islands, Bangka and Belitung.

Various studies and several media reports have shown that illegal tin mining practices have literally reduced the size of the land area in the province and left spectacular scenery of turquoise lakes marred by abandoned mining sites as a result of centuries of unregulated mining operations.

This environmental destruction was even felt in the early days, in the form of depleted fish stocks and damaged coral reefs as a result of dredging operations.

It did not take long for Governor Erzaldi, a veteran politician who served as mayor of Central Bangka district between 2010 and 2015 and again from 2016 until this year, to decide on a tougher stance against the industry. The governor, who assumed office in May, declared a moratorium on the issuance of new tin mining permits in August to further prevent environmental degradation.

"We have to start taking action, not just making plans. It does not mean we will immediately cease all tin production here, but we are making preparations for the time when we have to give up the tin mining industry," said Erzaldi, who won the election in the province in February, with support of the Great Indonesia Movement Party (Gerindra).

"In the past, we never had an action plan to prepare ourselves for the post-mining era," he said.

The moratorium, which means the provincial government will neither issue any new mining licenses, nor extend existing ones, is considered quite a bold move, considering that the tin processing industry remains a giant contributor to the provincial economy.

Bangka-Belitung's abundance of the metal, widely used in food packaging and as a key material in soldering in electronic products, has benefited various companies since the colonial era until today.

During the regime of Suharto, Indonesia's second president, the two largest tin processing operations were run by state-controlled Timah and privately owned Kobatin. However, since the reform era, the local government has had more power to issue licenses. This saw the entry of dozens of companies that obtained permits to mine and process tin in the province.

According to Central Statistics Agency (BPS) data, the tin processing industry was the main contributor to the provincial economy last year, followed by agriculture, forestry and fisheries. Tin contributed 78.02 percent of the province's total $1.44 billion export revenue in January-October 2017, with Singapore and Australia as the main export destinations.

In contrast, the province's imports only amounted to $62.4 million in the same period, with the bulk consisting of oil and gas products. Thus, statistically speaking, tin creates a huge trade surplus for the province, with its economic impact filtering down to all its people.

A worker performs final checks on refined tin in the warehouse of a private company in Pangkalpinang, Bangka Belitung, in this file photo. (Reuters Photo/Dwi Sadmoko)

Life Beyond Tin

Still, the governor, who was born in the provincial capital Pangkalpinang, realizes that it is a big risk if the province has to solely rely on tin processing in the future, and therefore the people must prepare to face an era after tin.

Like it or not, despite its huge contribution to the local economy, cumulative tin production in the province has been on a declining trend due not only to a weakening of the commodity's price on the international markets, but also due to the fact that many smelters already operate on tight margins.

The provincial administration has been forced to look to other economic resources, such as agriculture, forestry and fisheries, which, according to statistical data, should become the next economic engines.

It was also the central government's decision to declare Tanjung Kelayang as one of the country's 10 national priority tourism destinations beyond Bali – Indonesia's most popular tourism destination – that prompted the provincial administration to start thinking seriously about tourism prospects.

Tanjung Kelayang on Belitung Island offers exotic beaches with white sand and scenic granite boulders spread along the edge of the peninsula. The area is also ideal for snorkeling. The central government declared the area as a special economic zone, which allows companies investing in tourism-related developments to enjoy tax discounts, more relaxed customs and immigration requirements, and faster processing of permits.

Under a 2016 government regulation, the special economic zone must be ready for operations in 2019. The Jakarta Globe reported in September last year that Belitung Maritime Silk Road, a consortium of companies under the Dharmawangsa Group, had pledged Rp 8 trillion ($860 million) to develop facilities in the region.

Belitung Maritime Silk Road, a consortium of companies under the Dharmawangsa Group, has pledged Rp 8 trillion to develop a special tourism economic zone in Bangka-Belitung. (Antara Photo/M. Agung Rajasa)

Last year's Jakarta Globe report mentioned that several global hotel chains, including the Accor Group, Aston, Swiss Bell and even Ritz, had bought land in nearby Tanjung Tinggi as more tourists are expected to flock to the area once the special economic zone opens.

Local media reported in June that the China Harbour Engineering Company, Accor Asia Pacific and Starwood Asia Pacific Hotels and Resort had signed a memorandum of understanding to develop the Tanjung Kelayang area.

China Harbour reportedly committed up to $1 billion as it joined forces with Tanjung Kelayang operator Belitung Maritime, a consortium of Belitung Pantai Intan (Belpi), Nusa Kukila and Tanjung Kasuarina. China Harbour plans to develop a former tin mining area into infrastructure that will support the special economic zone, as it seeks to exploit the potential offered by Bangka-Belitung's geostrategic position.

Starwood Asia Pacific plans to invest Rp 418 billion to develop a Sheraton Hotel, while Accor Asia Pacific Indonesia plans to pour about Rp 400 billion into the development of a Sofitel Hotel and Resort.

"God willing, Sheraton's development will be completed in February," Governor Erzaldi said during the interview. Chief Economy Minister Darmin Nasution witnessed the signing of the memorandum of understanding in June, local media reported.

Despite a positive response from foreign investors to Belitung's tourism prospects, Erzaldi said his administration is also actively promoting the province's other main island.

"Bangka also offers incredible tourism prospects. Sungailiat for example, offers a blend of sports tourism and religious tourism," he said.

Tripadvisor, the world's largest online travel site, recommends on its "to-do list" for Sungailiat, a subdistrict of Bangka, visits to several old Buddhist temples, Gua Maria (Maria Cave), which is revered by Catholics, and nearby beaches within the city boundaries.

Bangka district is also known for religious tolerance, where ethnic Chinese, most of whom are Buddhists Catholics Protestants, live in harmony with native Malays, who are predominantly Muslim.

Erzaldi said a consortium has committed to invest up to Rp 200 billion in religious-related tourism facilities in Sungailiat.

He said on Bangka Island, the provincial government is also actively pushing for Tanjung Gunung in Central Bangka and Tanjung Ular in West Bangka to obtain special economic zone status from the central government.

"The Dyandra Group has shown interest in investing in Tanjung Gunung," the governor said, without elaborating.

According to the provincial government's website, Tanjung Gunung will see the development of water sports attractions, a holiday resort, hotel, water amusement park and culinary center, while Tanjung Ular will likely see the development of a port facility.

Despite most economic activity in the province being concentrated on Bangka due to its vast tin mining and agricultural operations, the island does not have an international airport, unlike neighboring Belitung, which has H.A.S. Hanandjoeddin International Airport, formerly known as Buluh Tumbang International Airport, in Tanjung Pandan.

"I don't really force Bangka to have an international airport like Belitung, but we are looking for better connectivity between Bangka and Belitung. Maybe an international port can perform this service," the governor said.

Bangka has the smaller Depati Amir Airport in Central Bangka and several small ports. Some light aircraft operators offer 30-minute flights between the two islands at a relatively high price, while a small ferry takes between four and five hours to complete the trip. A less practical approach would be to take a commercial flight from Bangka to Jakarta and back to Belitung in a trip lasting slightly less than two hours.

"What is most important, is to improve connectivity between the two islands," Erzaldi said.

Meanwhile, with the province's slightly less than 1.4 million people living in a total area of 16,424 square kilometers, only 20 percent of the land area is used for agriculture, with pepper, palm oil and rubber as the main products.

Bangka-Belitung, which split off from North Sumatra in 2000, managed to multiply its regional income to nearly Rp 700 billion this year from just Rp 48 billion when it first became a separate province. Besides tin processing, agriculture has made an equally strong contribution to the local economy.

"In a bid to improve production, the provincial government is helping farmers by giving them each 4 million free pepper seeds, along with assistance on how to cultivate pepper in a better way," Erzaldi said.

While Bangka-Belitung currently faces strong competition from Vietnam in pepper production, Indonesia was known as one of the best producers of the spice during colonial times.

Erzaldi said the local government will also turn its attention to palm oil and rubber production, which has traditionally been passed from one generation to another.

Thorium?

During the interview, the governor also unveiled hidden treasures that have not yet been exploited in the province. He highlighted some minerals that are often extracted as byproducts in the tin mining process.

One of which is thorium, a radioactive mineral regarded as a safer alternative for generating nuclear power. State-controlled tin miner Timah reportedly embarked on a plan in 2015 to develop a pilot project for the full-scale extraction of thorium.

"We can develop a new industrial zone based on this commodity to support power plants. This may be the future for us to replace coal," the governor said, excitedly. He added that tin mining operations often also yield other valuable minerals, such as zircon, which can be used as gems or in the decorative ceramics industry.

Investment Process

Erzaldi said amid all this potential, the local government seeks to simplify the investment process in the province.

"We understand that a long process for obtaining permits often discourage investors. We will play by the rules, but we will also provide assistance to speed up the process," he said.

Economic growth in Bangka-Belitung has declined and underperformed compared with growth in the national economy over the past few years, with tin mining activities having gradually declined. However, the province is facing a unique challenge – high inflation – as consumers are demanding more modern goods, such as electronics.

This led to relatively high minimum wages. The province's minimum wage standard is considered the fourth-highest in the country and it deters investment. This will be another political battle for Governor Erzaldi to fight as he tries to find a balance between populist policies and investors' demand for cheap labor at the time when the province needs as much investment as it can attract to start weaning it from its traditional mining industry.